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We introduce an international technology treaty that couples the funding of research for a more advanced abatement technology with an international emissions permit market. Under the treaty, each country decides on the amount of permits for its domestic industries, but a fraction of these permits is auctioned on the permit market, and the revenues are used to scale up license revenues for the innovators of abatement technologies. We discuss the conditions under which such a technology treaty can slow down climate change through technological innovations and whether it creates complementary incentives for countries to tighten permit issuance. Finally, we discuss how participation in Tech Treaties can be fostered and how such treaties might be implemented.

The gender gap in risk-taking is often used to explain differences in labor market outcomes. Some studies, however, suggest that this gender gap does not extend to professional contexts. This paper examines potential drivers of the gender gap in risk-taking, comparing the professional context of academia to a private setting. We draw on identity economics, which posits that individuals form multiple identities that moderate behavior across contexts. In an online field experiment with 474 scientists we vary the salience of the professional or private identity. We find that the gender gap in risk-taking is mediated when the professional identity is salient. We identify the switching of identities by females as an explanation. Our results suggest that if the gender gap in risk-taking is driven by selection, the selection is not (only) along risk-aversion, but (also) along the ability to switch between identities and to adapt to prevailing norms. This provides new insights for the discussion on gender, risk-taking and labor market policies, and suggests an important role for mentoring programs.

The paper analyses the effect of interest rate changes on education and child labor in an economy with a high-skilled sector, a low-skilled sector and fragmented credit markets. The high-skilled sector takes educated labor as input. The low-skilled sector takes unskilled labor, physical capital and natural common-pool resources as inputs. Credit supply consists of (a) loans with collateral in form of productive investments in the low-skilled sector and (b) higher-priced loans without collateral. Lower interest rates increase the net present value of the returns to education. They also reduce costs of capital investment in current production. This increases labor productivity and the opportunity costs of education. Overuse of the common-pool resource can reverse this productivity effect. We show that the overall effect of interest rate changes on education depends on the initial wealth of the household, resource use and the credit market segment that is subject to improvements.

Interest payments based on income flows are a common feature of informal loans. Such so-called `interlinked loans' can be seen as an insurance against very low disposable incomes, as interest payments are lowest when income turns out to be low. This paper examines whether interlinked loans indeed contain an insurance premium and how those premia are determined. A simple theoretical model predicts that interest rates of interlinked loans increase with income volatility when insurance premia exist. Based on data from a small-scale fishery in India, calculations show that on average, lenders receive 25% of the income, which corresponds to an average interest rate of 49% p.a.. A panel data analysis confirms theoretical predictions that interlinked loans contain an insurance component paid by the borrowers.

This paper explores the long–run development of an economy with a traditional sector based on common–pool resource-use, a modern, resource–independent sector with fixed entry costs, and an imperfect capital market. We show theoretically that introducing resource-use regulations increases incomes in the traditional sector and that this can trigger a development process with labor reallocation to the modern sector. Allowing trade of resource-use rights, or distributing resource-use rights unequally, broadens the scope for development.

Chapter 1: Does the Adverse Announcement Effect of Climate Policy Matter? A Dynamic General Equilibrium Analysis We quantify the welfare effect of a climate policy that is announced today, but implemented with a known time lag as political procedures impede immediate implementation. The policy is a carbon emissions tax whose time path is chosen optimally at the time when implemented. During the time span before implementation, the announcement induces a lower price of fossil fuel and thus higher emissions as compared to a no-intervention scenario. In principle, this adverse ‘announcement effect’ could more than outweigh in welfare terms the gain from the tax after implementation. We show this not to be just a theoretical curiosity. We quantify a ‘window of opportunity’ such that implementation before (after) its end is a welfare gain (loss) over the no-intervention scenario. The result is highly sensitive to assumptions on the resource stock which is afflicted with particular empirical uncertainties. Our central estimate is a window of opportunity of about 60 years. Hence, there is still time to act, but the window of opportunity may be smaller. Thus, the adverse announcement effect is a worrying phenomenon deserving political awareness. The model is a Ramsey model extended by an exhaustible carbon resource and linked to a stylized dynamic climate model adapted from Nordhaus (2008b). Chapter 2: When will Higher Interest Payments Lead to More Education? Based on observations from field studies in fishing communities in India, we include a fragmented credit market into a two-sector, two-period model with common pool externalities to establish conditions under which credit market distortions either increase or decrease education. We show that higher interest payments increase education if their negative effect on capital investment and therefore labor productivity in low-skilled production outweighs their positive effect on subjective discounting and therefore the present value of highskilled production. Positive common pool externalities from reduced capital investment in low-skilled production can counterbalance the impact of capital changes on low-skilled labor productivity and therefore on education. The overall outcome depends on the affected interest factor, the household’s initial wealth and the common pool externality. Chapter 3: Estimating the Insurance Premium in Interlinked Credit-Output Contracts On informal credit markets, one often observes a type of credit that does not base interest payments on the loan amount, but on income flows (interlinked credit-output contract). This can be understood as a risk sharing mechanism where interest payments include an insurance premium. This paper shows that the premium increases with the income volatility. Based on observations from small-scale fishing communities around Chilika lagoon, India, the paper also confirms the finding empirically. Furthermore, in contrast to pure credit contracts, interlinked contracts allow fishing boats as collateral around Chilika lagoon. This reduces their interest rate. It explains why interlinked interest rates turn out to be of similar size as micro finance interest rates even though the former include an insurance component.

Die möglichst präzise und vor allem zutreffende Vorhersage unsicherer zukünftiger Ereignisse ist eine permanente Herausforderung für Unternehmen. Prognosemärkte adressieren diese Aufgabe, indem sie relevante Informationen aufdecken, bewerten und aggregieren. Mit diesem Bericht leisten wir einen Beitrag zur Bewertung der Leistungsfähigkeit von Prognosemärkten und tragen zusammen, wo potentielle Schwierigkeiten liegen und inwiefern dafür bereits Lösungsansätze vorhanden sind. Es hat sich gezeigt, dass ein webbasiertes System mit einem virtuellen Aktienmarkt über den Preismechanismus effizient individuelle Urteile aggregieren kann und sich durch vergleichsweise niedrige Transaktionskosten und hohe Skalierbarkeit in Bezug auf die Anzahl möglicher Teilnehmer auszeichnet. Die operative Implementierung kann durch internes Marketing bereits vor dem Launch, durch die richtige Sprache, durch eine kontinuierliche Kontrolle des Anreizsystems und durch eine klare Unterstützung vom Topmanagement unterstützt werden. Erfahrungen der Wirtschaft zeigen die bisher noch schwierige Realisierung langfristiger Prognosen über Predictive Markets, da das hierfür optimale Anreizschema noch nicht ausreichend erforscht ist. Außerdem sind weitere empirische Untersuchungen notwendig, um bessere Aussagen über den Umgang mit spekulativen Blasen, über die ideale Anzahl von parallel handelbaren Aktien und über die Kalibrierung des Prognosehorizonts treffen zu können.